Allcargo Global eyes acquisitions in India, east Asia

Mumbai: Allcargo Global Logistics is scouting for acquisitions in the fast growing markets of India and east Asia, after taking stakes in a couple of Hong Kong-based logistics firms last year, as the Indian firm looks for strategic fits to its container load and multi-modal transport operations.

Allcargo is a market leader in the less-than-container-load (LCL) segment -- shipments where cargo is insufficient either in weight or quantity for standard containers.

“In our MTO and LCL segment we are looking overseas where we believe it would straightaway add either in terms of strategy or marketshare,” Allcargo group chief financial officer S. Suryanarayanan told Reuters in an interview.

“We are looking more at the far east because that is where the growth story is happening. In India too, we are looking at some acquisitions, they will all be in the verticals that we are in,” Suryanarayanan said over the weekend.

The company had raised about Rs100 crore last April through a share sale to institutions for future acquisitions and general capex.

In October last year, Allcargo, through a subsidiary, had acquired business rights and controlling stake in Hong Kong-based firm engaged in NVOCC (non vessel owning common carrier) business in China and other parts of east Asia.

Allcargo will not need to raise further funds for the planned acquisitions as the firm has roughly Rs360 crore in cash reserves and funds from operations, he said.

“So if an acquisition comes with a strategic fit and the price is right we have enough money to go ahead,” he said.

Capex, Expansion

The company has earmarked roughly Rs200 crore in calendar year 2011 to expand capacity across its ports, container freight and equipment hire businesses. The capex will be funded out of internal accruals, he said.

The firm operates container freight stations at Mumbai, Chennai and Mundra Port and an Inland Container Depot facility in Indore.

The firm plans to hike capacity later this year at its Chennai facility to 120,000 TEUs (twenty foot equivalent units) from between 90-95,000 TEUs now, Suryanarayanan said.

India’s port traffic is expected to triple by 2020 to 2,495 million tonnes. Investments worth Rs2.7 trillion are expected during the decade to boost port capacity, according to estimates released by India’s shipping ministry.

The firm’s consolidated revenue for the year ending December grew almost 28% to Rs2,630 crore. Net profit for the calendar year rose 29% to Rs180 crore.

“I think there is another 100 basis point increase (in margins) we can easily target in the global LCL market on an annualized basis,” Suryanarayanan said.

Allcargo which gets the majority of its consolidated revenue from its wholly-owned European unit ECU Line, expects revenue to grow at the same rate as they did in 2010, he said.